Tales from the Socialism Side – Part 3 – crisis of capitalism?

I have been promising a joke the Russians used to tell, under their state-socialism (we called it Communism but they always reminded me they had not reached the Communistic ideal yet – it was just socialism).

An old man had been given the job of being a lookout posted atop Lenin Hills in Moscow, watching for the coming of the “Classless Society” (The communist ideal world). He was doing such a good job some Politburo people approached him with another job they thought was important, watching for the next crisis in the capitalist system.

“It sounds good, but no thanks,” he replied. “I don’t want to give up a permanent job for a temporary one.”

With over 50 years of experience in the experiment of state socialism (I heard this one in the seventies) the Russians of that era need to be credited at least with having learned something. To their great credit they could make poignant jokes about it.

But true.

Crisis has been a huge part of the strength of our economy, historically. Good business ideas thrive. Bad ones die. Life goes through cycles.

I was taught in economics that every ten years or so there would be a recession. That was part of the cycle. It has been pretty much true. I was born in 1950 and there have been 6 since then that I remember. This article lists nine.

Guess what? Every recession is a crisis in capitalism. People lose jobs. The value of stock shrinks. People’s retirements lose some of their paper value, if it is in stocks (advisors used to always say never put it all in stocks as you get older – what happened?).

But then what happens after this “crisis?” Businesses and the economy bounce back. People get smarter. Businesses get more innovative and more efficient. Some of the sludge has been burned out of the engine. It runs cleaner.

I know it is painful. Tell me about it. I lost a business in the early nineties partly die to the recession of 89-92. But guess what? I also started another one – one that is still successful. And I re-invented myself, and got ready for a new way of doing business. That is what got me primed for entering the Internet business world in 1995. If the crisis had not come, I would probably still be back there.

I was talking about this with a colleague and we were discussing the horrible years before Reagan was elected president in 1980 and the change that came after that. The economy was in shambles in the late 70’s. Inflation was near 15%. Unemployment meteoric. Business was stagnant. Energy crises were common. Worst of all, people were not starting small businesses.

Contrast that with ten years later – the late eighties. Entrepreneur-ism was everywhere. Businesses were exploding. The stock market had gone from under 1000 to almost 3000, a whole new revolution in Information and Communications was underway, led largely by entrepreneurs. Something clearly was going on.

It DID seem to be related to the Reagan years – the opening up of business opportunities, tax cuts, deregulation, just the “can-do spirit!” The whole world was led into an amazing new economy by the US – that is still going on! And the Democrats and liberals were shouting “Voo-doo economics” all the way!

In our discussion we wondered if, had things kept going under the more state-controlled systems of “The Great Society” years (started by Lyndon Johnson and carried through the Carter years), maybe Bill Gates would have been working for IBM, Steve Jobs have been an insurance salesman and Michael Dell, well, a college drop-out!

Take a look at the chart below and the web site that it links to.

Slice of stock market history

Slice of stock market history

What, exactly, did the approach to socialism that lasted from the mid sixties through the end of the seventies do for the economy? Look at the charts again.

Flat.

Do you see now why some are worried about a turn back towards socialism, of any kind? We can’t be scared by crisis! We also cannot be scared off by the fear mongers who try to push us back under the ‘comforting’ umbrella of state control.

Take a look at these words from the London Daily Telegraph – sober words:

“This is what socialist economics brings. The intervention, or rather interference, of the state in financial and economic matters can only lead to sclerosis, the suppression of enterprise, the raising of taxes, starvation of investment, lack of innovation, technological retardation and the rise of the power of organised labour…If you doubt this analysis, recall what happened in this country between 1945 and 1979, when such an ethos as we are now returning to existed unchallenged, even by Tory governments. The more the state intervened, the more it had to intervene: the appetite grew with eating….”

Then look what the Brits had to say about the truth of America’s example:

…We condemn America as the nation that used capitalism as a weapon against so-called “ordinary people”, but think back and compare America in the 1970s to Britain at the same time: no American had to wait three months for a telephone to be put in, or had only three television channels to choose from, or had to watch rubbish piling up in the streets, the dead going unburied or factories open just three days a week because of industrial action and the failure of the command economy….”

(This is, by the way, the best article I have read that explains what is really going on).

The lesson we need to draw? Take a look at history! learn from it. Do not give in to fear and foolishness.

Ben Franklin used to say:

Experience is a dear teacher; but fools will have none other.

There is another way. Choose it, America!

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